Tuesday, 23 June 2020 07:55

Recovery better than expected

Written by  Sudesh Kissun
Michael Harvey, Rabobank Michael Harvey, Rabobank

The global dairy outlook isn’t looking as dire as it was at the height of the Covid-19 crisis.

Demand is returning as lockdown restrictions loosen in key markets, prompting at least two banks last week to up their forecast payout for the 2020-21 season.

Rabobank is now forecasting a farmgate milk price of $5.95/kgMS, a jump of 35c. Westpac lifted its forecast payout by 20c to $6.50/kgMS.

RaboResearch senior analyst Michael Harvey says government intervention buying and the reopening of the foodservice sector have helped jump start dairy demand across key international markets.

“The northern hemisphere experienced a rebound in milk and dairy product prices toward the end of quarter two as a result of government intervention, while we’ve also seen a rebound in cheese prices – particularly in the US – with this largely attributable to the re-opening of the food service sector,” Harvey says.

Dairy markets have performed better than expected over recent months and prices should now avoid dropping to the levels anticipated earlier in the year. 

 “And these factors have helped boost dairy demand and prices have moved back toward, or in some cases above, pre-Covid levels.”

Westpac agri economist Nathan Penny agrees that Covid’s impact on global dairy prices has not been as severe as first feared.

Global dairy prices have now stabilised and begun to recover from Covid-driven price falls earlier in the year, he says.

Penny notes that whole milk powder prices were effectively flat over May, while June prices have lifted 4.4%, with similar movements in prices overall. 

 “The price stabilisation and improvement have come earlier than we anticipated.”

However, both analysts caution that things could easily turn sour and a looming global recession could also hit prices.

Harvey said while price rebounds were a sign the global dairy sector was on a path to recovery, the true strength of the current market was difficult to assess and the sector was not yet “out of the woods”. 

He expects expanding global supply and economic recession across much of the globe to further hinder the speed of the recovery in dairy markets.

Penny agrees that a global recession still looms large.

Global dairy prices will soften as the global recession weighs on global dairy demand later in the year. 

“Indeed, we have factored in for global dairy prices to weaken over the peak NZ production months as the extra dairy volumes combine with softening global demand thus it pays to be prepared. 

“With that in mind, it pays to note that it is still early days in the season and the uncertainties around the Covid impact through the full dairy season remain large. On this basis, we recommend that farmers approach the season with ‘eyes wide open’.”

More like this

Wine tour woes

Bookings for premium wine tours “vanished” when New Zealand’s borders closed, say operators struggling under Covid-19.

Vintage update

Wine companies, large and small, are grappling with the potential shortage of a reliable labour force for vintage 2021, with borders closed to international workers.

Covid-19 a big hit to small wineries

Losing boutique wineries to Covid-19 would be a blow for New Zealand’s wine industry, say the authors of a new report into challenges for small operators.

Digital juice

Covid-19, e-commerce and the risk of digital debt.

Open doors

As wineries enter the spring season, many opening cellar doors after a period of Covid-19 closure, the mood appears one of cautious optimism.



An exercise in futility

Former Fonterra Shareholders Council (SHC) chair and Waipu farmer Simon Couper puts his views on why the recent review of the council’s functions was a futile exercise.

Top student off to co-op

Massey University's top agricultural student for 2020 is off to join Fonterra and continue his interest and passion for the dairy industry.


Machinery & Products

Let aura feed the mob

In a move that appears to have been repeated by many equipment manufacturers, Kuhn confirms it currently working on several…

Battery charger range recharged

Projecta's popular ‘Charge N’ Maintain’ automatic battery charger range has now been recharged – with the introduction of new features…

» The RNG Weather Report

» Latest Print Issues Online

Milking It

Eyes have it

OPINION: Painting eyes on the backsides of cows could save their lives, according to new research by Australian scientists.

Walkers versus cows

OPINION: A North Yorkshire teacher has become at least the second member of the public to be trampled to death…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter